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    ALFI NewsDigest february 28, 2011    
          in this edition      
    1. Headlines
2. News from ALFI's Representative Office in Asia
3. ALFI past events
4. ALFI events
5. Other events



European Commission progress report: “Regulating financial services for sustainable growth”

The European Commission has published a progress report entitled “Regulating financial services for sustainable growth” which provides an overview of the Commission’s legislative initiatives for counteracting the roots of the financial crisis. In this report the Commission has stated that, where possible, new legislation will be directly applicable (i.e. in the form of Regulation rather than Directive). This will eliminate the need for transposition time and the risk of inconsistencies in national transposition. The Commission expects that all texts of the reform will be adopted by the Commission by the end of 2011.

Some of the legislative measures proposed along with indicative timing:

  • Directive on credit mortgage (March 2011);
  • Securities Law Directive (May 2011);
  • Revision of the Market Abuse Directive (May 2011);
  • Review of the Markets in Financial Instruments Directive (May 2011);
  • Revision of the Capital Requirements Directive (CRD4) (Q2 2011);
  • Revision to the Directive on Packaged Retail Investment Products (PRIPs) (Q2 2011);
  • Implementing measures for Solvency II (level 2) (Q3 2011);
  • Legislation on corporate governance in financial institutions (June 2011); and
  • Crisis management legislative proposal (June 2011).


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German draft laws concerning investor information

The German legislator is about to adopt two laws, which may have an impact on the distribution of foreign funds to Germany, namely in the context of investor information. Knowing that the legislative process regarding both bills is still ongoing, the following statements cannot yet be considered as final or confirmed.

The German draft law implementing the UCITS IV Directive into national law (as at 24 January 2011) will introduce for German UCITS the obligation to produce a Key Investor Information Document (KID) already from 1 July 2011. In contrast, foreign UCITS distributing their shares/units to Germany and benefitting pursuant to their domestic law from a transitional period of e.g. one year – as it is the case for Luxembourg domiciled funds – will be allowed to continue to use the simplified prospectus by 30 June 2012 at the latest.

For both domestic and foreign non-UCITS, the draft law requires the production of a KID from 1 July 2011. Apart from a general reference in this regard to the provisions of the KID Regulation (EU) n° 583/2010, it includes specific rules for property funds, infrastructure funds, (funds of) hedge funds and regarding the risk profile of the aforementioned types of funds.

Next, the German Ministry of Finance will hold a public hearing on the UCITS IV implementing law on 23 February 2011.

The second law aiming at strengthening investor protection (dated 8 November 2010) was adopted by the German Parliament on 11 February 2011, namely as amended by the Finance Committee. By including changes to the Securities Transaction Act (“Wertpapierhandelsgesetz”), it will introduce the general obligation to provide customers prior to the conclusion of a business transaction with a short and easy to understand information sheet (called “Produktinformationsblatt” or abbreviated “PIB”) on any financial instrument linked to a buy recommendation made. The PIB‘s content will be defined later by national regulation and will probably be similar to the KID, but not identical with it.

The amendments introduced by the Finance Committee refer for both domestic and foreign funds explicitly to the relevant KID rules, which will be implemented by the draft law implementing the UCITS IV Directive into national law (see above). This means that neither UCITS nor non-UCITS will have to produce a PIB for their investors, even if the second draft law is implemented before the adoption of the UCITS IV law.

Following the adoption in Parliament, it is now up to the Federal Council (“Bundesrat”) to approve the law, which will have to be published in the official gazette (“Bundesgesetzblatt”) to enter into force.

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CSSF circular 11/498 on the transposition of the UCITS IV Directive into Luxembourg law

On 10 January 2011, the Luxembourg supervisory authority CSSF published a circular regarding the entry into force of the Law of 17 December 2010 on undertakings for collective investment in transferable securities (UCITS).

It summarises the structure of the new law and its main innovations. Reference is made to further EU regulations from the Commission and guidelines from the Committee of European Securities Regulators.

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German UCITS IV implementation Law – tax provisions

With letter dated 9th February 2011 the BUNDESVERBAND INVESTMENT UND ASSET MANAGEMENT E. V.(BVI) and ALFI have jointly commented on the tax provisions foreseen in the draft UCITS IV implementation law. Please click here to view the letter.

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German Investment Tax Act - Update

The German Ministry of Finance grants some transitory exemptions for the implementations of the annual tax act 2010.
Please click here to view the letter.

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Affidavit (declaration of domicile) / Circular no. 24 in respect of collective investment schemes as the subject of Swiss federa

On 28th December 2010 the Swiss Bankers Association and the Swiss Fund Association published a circular regarding Affidavit (declaration of domicile). Please click here for the english, french and german version.

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ESCA publishes draft decisions on investment funds and regulating investment management activity

The UAE Securities and Commodities Authority (ESCA) has published for consultation: (1) a draft decision on investment funds (the ‘Investment Funds Regulation’); and (2) a draft decision on regulating investment management activity (the ‘Investment Management Activity Regulation’).

The Investment Funds Regulation applies to all matters relating to local investment funds and to the promotion of foreign funds in the UAE. For the purposes of the Investment Funds Regulation, a local investment fund is an investment fund established in the UAE and licensed by ESCA. Funds established in any of the UAE free zones such as the Dubai International Financial Centre (DIFC) are considered to be foreign funds. The Investment Funds Regulation prohibits an entity from establishing a local investment fund without first obtaining a licence from ESCA. Furthermore, ESCA’s prior approval is required prior to any investment fund being promoted within the UAE.

The Investment Management Activity Regulation prohibits a person from undertaking investment management activity for securities in the UAE without first obtaining a licence from ESCA. Investment management comprises management of securities portfolios for others or the management of investment funds in accordance with defined objectives and policy.

Draft decision on investment funds: http://www.sca.ae/English/Documents/Investment_Fund_Regulation_EN.pdf

Draft decision on regulating investment management activity: http://www.sca.ae/English/Documents/Decision_on_Investment_Management_Regulation_EN.pdf

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Luxembourg, the centre of excellence for Carbon Investment Vehicles: please click here

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New edition of the LFF Mediawatch

Please find hereafter the link to the new edition of the Luxembourg for Finance (LFF) Mediawatch:


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European Commission’s consultation on the UCITS depositary function and on the UCITS managers’ remuneration

The ABBL/ALFI Depositary Bank Forum has submitted its response to the European Commission’s consultation on the UCITS depositary function and ALFI has also submitted its response on the UCITS managers’ remuneration.

UCITS and the applicable legal regimes have proven over the past two and a half decades that they are beneficial to the European economies. UCITS has also provided a solid underpinning for a well-regulated and well-managed industry. Investment limits, capital requirements, organisational controls on asset segregation and safekeeping, disclosure obligations and oversight responsibilities of Depositaries introduced by the UCITS Directive 85/611-EC and its subsequent amendments have been important contributing factors to the success of the European UCITS industry and brand.

The Depositary related provisions have been and are still the object of an intense debate. New legislative proposals in this area will certainly be some of the most difficult to draft in order to achieve an enhanced investor protection while at the same time avoiding negative impacts on the UCITS product and the fund industry in general. In so doing, ALFI believes that a number of points should be taken into due consideration by the Commission, which are outlined in our responses.

Furthermore, we support the overall purpose of the consultation paper that remuneration structures with financial institutions are aligned to a clear and common set of principles to protect against excessive risk taking behaviour by individuals which could give rise to wider financial instability. However, asset managers or UCITS companies are not banks: the nature of the risks that asset managers take in their core businesses are fundamentally different from those assumed by banks and credit institutions. This seems to be reflected in the CEBS guidance – relating solely to credit institutions - on remuneration. Against this, it should be envisaged that when amending the UCITS directive, the specificities of the asset management sector need to be taken into account so as to ensure the effectiveness of the sound remuneration policy applied to UCITS managers.

Please click here.

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ALFI comments and responses to the European Commission's consultation on the review of MIFID

ALFI responded in a specific paper to the European Commission’s consultation on the MiFID review. The paper addresses among other the questions related to the possible limitation of MiFID exemptions, the modification of the “execution only” regime and the Commission’s suggestion to impose additional obligations in the context of investment advice.

Please click here.

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ALFI response to the European Commission consultation paper on legislative steps for the PRIP's initiative

ALFI responded to the European Commission’s consultation paper on packaged retail investment products (“PRIPs”). ALFI strongly support the creation of a level playing field through a cross-sectoral approach to the regulation of retail investment products, focusing in particular on pre-contractual product disclosure.  The rationale for the PRIPs initiative is a level playing field for investment products sold to retail investors in order to create a standard of investor protection. The UCITS framework embodied a high level of investor protection and the application of the UCITS disclosure standards to all PRIPs help retail investors to understand, compare and use product disclosure information in order to make informed investment decisions on their own.

Please click here.

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ALFI: Value Added Tax (VAT) update

ALFI has published a VAT update regarding the deduction right of investment funds and their service providers, and the VAT treatment of outsourcing of investment funds services. It aims to summarise recent discussion with the Luxembourg VAT administration.

Please click here to download the document.

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European Commission: summary report on the consultation on double taxation problems in the EU

In 2010, the European Commission launched a public consultation to ask individuals, companies and tax advisers for information on double taxation problems that they have encountered when operating across borders within the EU:

The aim of the public consultation was to clearly identify the nature of the problems that EU taxpayers are facing and the extent to which many individuals and companies are encountering the problem of being taxed on the same income or profits in two or more different Member States.

The consultation concerned all direct taxes – income taxes, corporate taxes, capital gains taxes, withholding taxes, inheritance taxes and gift taxes – and aimed at finding out ways to effectively and rapidly remedy the double taxation identified.

The European Commission has now published a summary report on that public consultation.

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Tackling cross-border tax problems: Commission launches consultation on taxing dividends

The European Commission on 28 January launched a public consultation, calling for feedback on taxation problems that arise when dividends are distributed across borders to portfolio and individual investors in the EU.

The withholding tax regimes currently used to tax cross-border dividend payments may cause problems for the Internal Market through double taxation and discriminatory treatment.

The public consultation will be open for contributions until 30 April 2011. On the basis of the feedback, the Commission will decide how best to proceed on this issue.  

For further information see the Midday Express and http://ec.europa.eu/taxation_customs/common/consultations/tax/2011_withholding_taxes_en.htm

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The Commission calls for action on commodities and raw materials

Excessive volatility of prices on all major commodity markets occurs at a time when the competitiveness of European industry crucially depends on efficient and secure access to raw materials. Raw materials are vital for the EU’s economy and particularly crucial for the development of modern environmentally friendly technologies such as electric cars and photovoltaics. The recent volatility in commodity prices threatens to increase inflation and global raw material markets are becoming increasingly distorted due to protectionist measures. The price fluctuation on the agricultural commodity markets has an impact on farmers, food-makers and consumers, including in the poorest countries. In response to these challenges, the European Commission presented today an integrated strategic vision to tackle challenges in Commodity markets and on Raw materials. The Commission proposes actions to improve the regulation, functioning and transparency of financial and commodity markets. The European Commission also calls for the swift implementation of the Raw Materials Initiative adopted in 2008. The Communication on commodities and raw materials contributes to the Europe 2020 flagship initiative 'A resource-efficient Europe' that was adopted last month.

Please click here to view the text and Q & A:


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Commission requests ESMA advice on possible delegated acts concerning the amended Prospectus Directive

The European Commission has requested the European Securities and Markets Authority (ESMA) provide technical advice on possible delegated acts concerning the Prospectus Directive as amended by Directive 2010/73/EU. The amending Directive has three main objectives: increasing efficiency in the prospectus regime; reducing administrative burdens for companies when raising capital in the European Union; and enhancing investor protection.

Under the mandate ESMA is asked to:

  • advise with respect to the Commission's obligation to adopt delegated acts by 1 July 2012 in relation to the format of the final terms to a base prospectus and to a summary prospectus and to the detailed content and specific form of the key information to be included in the summary;
  • advise on possible additional delegated acts for technical adjustment and clarification to a number of requirements of the Prospectus Regulation; and
  • assist in the preparation of a comparative table of the liability regimes applied by the Member States in relation to the Prospectus Directive.

The Commission requests that ESMA submit the technical advice by 30 September 2011.




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ESMA: chairmanship confirmed

Please click here to view the press release.

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IOSCO: Final report on principles of point of sale disclosure

Following a public consultation, the International Organization of Securities Commissions (IOSCO) published this week its final report regarding principles of point of sale disclosure.

The consultation report of November 2009 focused on Collective Investment Schemes (CIS) and was based on an Issues Paper that examined the issues raised by point of sale disclosure, including:

-      whether regulatory disclosures are in fact effective in addressing information asymmetries that exist between investors, producers and sellers;

-      what constitutes key information;

-      how information should be delivered and whether a layered approach5 should be used;

-      what exactly should be understood as delivery;

-      at what point in time the information should be delivered;

-      use of plain language rather than technical jargon; and

-      the format of disclosures.

As mentioned in Appendix 3 (public comments received by the Technical Committee on the consultation report) and further analysed in the feedback statement (Appendix 1), ALFI and 21 other stakeholders participated in this consultation.

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2011 work programmes published by European Institutions

The European Commission, the incoming Hungarian Presidency, the ECOFIN council and ESMA have recently published their work programmes for the year 2011. Please click on the link for further details:

-       Commission work programme

-       Programme of the Hungarian Presidency

-       ECOFIN work programme

-       ESMA work programme

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Circular introducing beneficial income tax system for highly qualified foreign workers

A new tax circular (L.I.R. N° 95/2) on highly skilled workers was published by the Luxembourg Tax Authorities (Administration des Contributions Directes) on 31 December 2010.

The aim of this tax regime is to attract highly qualified individuals to Luxembourg and to reduce the expenses incurred by companies who employ foreign workers.

As from 1 January 2011, specific tax provisions will thus apply in Luxembourg to highly skilled workers relocating to Luxembourg.

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European Commission briefing paper on the application of the proposed Consumer Rights Directive to financial services

The European Commission’s Directorate-General for Internal Policies has published a briefing paper on the application of the proposed Consumer Rights Directive (CD) to financial services. The aim of the briefing paper is to explore the potential overlaps and inconsistencies between the proposed CD and sector-specific law already in force in the area of financial services.

Some of the key findings of the briefing paper include:

  • the scope of application of the proposed CD is not entirely clear in relation to investment services and information obligations in off-premises contracts;
  • the relationship between investment services, which come under the law related to off-premises contracts, and financial services whose price depends on fluctuations in the financial market outside the trader’s control, which are exempted from the law related to off-premises contracts, is unclear and should be clarified; and
  • overlaps exist between the rules on off-premises contracts and specific legislation on financial services may occur with the information obligations of the Payment Services Directive (2007/64 EC).

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Regulation on OTC derivatives, central counterparties and trade repositories – timetable

The European Parliament Legislative Observatory has published a procedure file regarding the Regulation on OTC derivatives, central counterparties and trade repositories (also known as European Market Infrastructure Regulation – EMIR). Amongst other things, the document contains the proposed timetable of procedural events such as:

  • the Council is expected to debate or examine the proposed legislative text on 15 February 2011;
  • the European Parliament is expected to have a plenary session on 15 May 2011 (indicative date); and
  • the Council is expected to reach political agreement on the final piece of legislation on 17 May 2011.


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IRE - Investment Fund Committee: Technical note on reports

The Investment Fund Committee of the IRE has produced a schedule which summarises the various reports to be prepared and related responsibilities in the context of specific situations such as contributions in kind, mergers, liquidations, etc. It contains relevant information with regard to the type of audit reports to be issued; to whom these reports are adressed; the legal and/or regulatory references; as well as the person who is responsible for the preparation of the financial information.

Please click here to download the document.

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News from ALFI's Representative Office in Asia

Potential changes in Taiwan to impact foreign funds

The FSC,Taiwanese Financial Supervisory Commission, is considering to reducing subsequent registration applications to 1 sub-fund only.

SITCA, the Securities Investment Trust & Consulting Association of R.O.C., has communicated publicly that FSC is considering reducing the subsequent registration applications to 1 sub-fund only. Currently, FSC is encouraging master agents to register 1 sub-fund at a time only, whereas the registration of a maximum of 3 sub-funds (at a time) is still legal and valid.

This could greatly restrict certain foreign umbrella funds that tend to launch multiple new sub-funds.

Presently, this new restriction is not yet in force, but could be introduced at any time.

Further information will be provided at a later stage.

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Hong Kong SFC clarifies Product Key Facts Statement (KFS) issues

The SFC, Securities and Futures Commision, issued a circular on 16 December 2010 to provide guidance and clarification to the industry on the implementation arrangements to the Code of Unit Trusts and Mutual Funds in respect of the production of a product key facts statement (“KFS”) and revisions to the offering documents as required under the new regulatory regime. 

In addition, the SFC has issued two Frequently Asked Questions on the transitional arrangements for implementing the new regulatory regime to provide further guidance and clarification to the industry.

Please refer to the link below for the circular:


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Mainland China to launch a trial for mini-QFII scheme

The China Securities Regulatory Commission (CSRC) announced during the Asian Financial Forum on January 18 that Mainland is ready to launch a trial for the qualified foreign institutional investor scheme, or mini-QFII scheme, allowing domestic brokerages and fund houses to raise offshore Yuan, located in Hong Kong, to invest in Mainland China’s A-shares market. This scheme is expected to shift 50 billion Yuan of overseas capital to the Mainland’s bond and stock markets.

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ALFI past events

LFF roadshow to the Middle East

ALFI participated in the LFF roadshow to the Middle East from February 7 to 10. The 80-people strong delegation was led by the Crown Prince Guillaume of Luxembourg and the Minister of Finance Luc Frieden. Seminars were organized in Abu Dhabi, Riyadh and Beirut. The Abu Dhabi and Riyadh seminars each featured a panel on investment funds and the Beirut seminar a high level roundtable which included ALFI’s chairman as a panellist.

In addition, a joint meeting of the ALFI-Dubai working group was held in Dubai. This was on occasion for participants from the delegation and the local members of the working group to get together and exchange views on recent developments.

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26 & 27 January: ALFI Breakfast Seminars in Boston and New York

End of January, ALFI made a short visit to the US with breakfast seminars in Boston and New York focusing on Alternative Investments, UCITS IV and Alternative UCITS as well as the AIFMD. About 105 people were in attendance in Boston and, despite a snow storm in New York on the evening before the event, almost 110 people participated in New York. A delegation of between 30 and 40 from Luxembourg took part in the roadshow. The presentation slides can be downloaded from this link.

ALFI will return to the US and also include Toronto in Canada during the week of October 3rd 2011. The details will be confirmed soon and available on our website www.alfi.lu or directly on this link.

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ALFI events

2011 Confirmed Event Dates

15 March

 ALFI Gala Dinner

 15 & 16 March

 17 March

 ALFI Spring Conference

 ALFI Microfinance Conference in association with LuxFlag

 31 March

 ALFI PRiM & Risk Management Conference

 19 May

 ALFI Seminar London

 9 June

 ALFI Annual General Meeting

 15 & 16 June (tbc)

 ALFI Roadshow to Switzerland (Zurich & Geneva)

 26 September

 ALFI Golf Tournament

 27 & 28 September

 ALFI Global Fund Distribution Conference

 4 - 7 October

 ALFI Roadshow to Toronto & USA

 22 & 23 November

 ALFI European Alternative Investment Funds Conference


ALFI events calendar 2011 - please click here

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15 & 16 March 2011: ALFI Spring Conference

"better regulation - clearer information - more protection"

Keynote speakers:

  • Elisabeth Corley, CEO, Allianz Global Investors Europe GmbH, Munich
  • Jean Guill, Director General, CSSF, Member of the Management Board, ESMA
  • Sahar Hashemi, Coffee Republic & Skinny Candy Entrepreneur and bestselling author, London
  • Keith Lawson, Senior Counsel - Tax Law, ICI
  • Tim Shakesby, Policy Officer, European Commission, DG Internal Market and Services, Brussels
  • Peter Smith, Head of Investments Policy, Financial Services Authority, London
  • Victor Rod, Director, Commissariat aux Assurances, Luxembourg, and Alternate Chair, EIOPA

To register, please click here.

read more

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15 March 2011: ALFI Fund Industry Gala Dinner at the Philharmonie

Once again ALFI organizes a Gala dinner on the evening of the first day of the Spring conference, on Tuesday 15th March 2011. This event offers unrivalled networking opportunities and takes place at the beautiful Luxembourg Philharmonie Concert hall.

click here to register

If you would like to reserve a table of 10, please contact us

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17 March 2011: ALFI Microfinance Conference in association with LuxFlag

"Responsive Microfinance - Microfinance current trends, threats and opportunities - impact financing"

programme online!

Please click here for fees and to register

read more

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31 March 2011: ALFI & PRiM Risk Management Conference

Programme online

Please click here for fees and to register. Early bird deadline 25th February - only € 250 for ALFI & PRiM members.

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Other events

19 - 21 May 2011: 6th European Jurists’ Forum in Luxembourg

Three main topics :

1) Financial regulation: European law put to the test

2) Fundamental rights

3) Information law in a cross-border European context

For more details please visit the conference website: www.eurojurist2011.lu

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